07 Nov What tax will I owe when I sell my New Jersey home?
Q. We will be selling our home in the spring of 2020. We think six months after that, we will look for a house in Florida. What percentage of tax will I have to pay on my New Jersey home, which has been paid off and has been my residence for the last 30 years?
— Getting out
A. Congrats on the move, but we’re sorry to see you will be leaving New Jersey.
New Jersey follows the federal tax rules with it comes to capital gains taxes on your home.
Taxpayers who sell a primary residence that they owned and lived in as their primary residence for at least 24 of the last 60 months may take an exclusion of $250,000, or $500,000 if married, from the gain on the sale of the home, said Howard Milove, a certified public accountant with Access Wealth in Roseland.
“If you have a gain even after applying the exclusion, you would pay tax both at the federal and New Jersey state level,” he said.
The sale would qualify for favorable capital gains rates at the federal level and ordinary income tax rates for New Jersey which range from 1.4 to 10.75 percent, Milove said, noting the 10.75 percent rate only applies once your taxable income exceeds $5 million.
Remember you can also deduct capital improvements from your profit on the sale. You can learn more about that here.
You won’t need to worry about the so-called exit tax, which is a tax withholding meant to force out-of-state taxpayers to file a New Jersey return and pay tax due on a home sale, if any, he said.
That would only apply if the seller is a non-resident of New Jersey at the time of the closing, but it appears you will still be a New Jersey resident then.
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This story was originally published on Nov. 7, 2019.
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